On 7 September 2023, the Faculty of Finance of the City University of Macau held the Finance Seminar Series [1] Hengqin-Macao Cross-Border Finance Seminar (1) at the Ho Yin Convention Centre. Ms. Li Zhang, General Manager of Guangfa Securities Hengqin Sales Department and Chairman of Zhuhai Branch Institutional Committee, was invited to deliver a speech titled “Discussion on the Core Elements of China Domestic Capital Market”. Guests attending this seminar on-site include Mr. Shaowei Guan, Macao Business Director of GF Securities Zhuhai Branch, Dean Adrian Cheung and Associate Dean Eva Khong of Faculty of Finance, City University of Macau.

First, General Manager Zhang introduced the core elements of the capital market. In the capital market, valuation and liquidity are two key factors. Market conditions include overall market trends, macroeconomic factors, and industry prospects. Company conditions include financial performance, competitive position, and future growth potential. Investor sentiment refers to the emotions and confidence of market participants towards specific assets or the market as a whole, and these factors collectively affect the valuation level of assets. Liquidity involves the transfer and exchange of risk and wealth. Narrow liquidity refers to the free cash flow and base currency of banks, which are the freely disposable monetary funds in the market. Broad liquidity refers to the free cash flow and deposit currency of the real sector, which are the funds that companies and individuals can freely dispose of.

General Manager Zhang stated that understanding valuation is crucial for investors to make wise decisions in stock investment. The relationship between stock prices and corporate earnings constitutes the logic of stock investment, and market valuation is influenced by risk-free interest rates. To demonstrate the market value, net profit, and price-earnings ratio (PE) of companies, General Manager Zhang cited examples of Maotai, ICBC, and CATL, pointing out the significant differences in market value, net profit, and P/E ratio among different companies. Therefore, when conducting valuation analysis, investors should consider factors such as the financial condition of the company, industry prospects, and market sentiment.

General Manager Zhang pointed out that liquidity is closely related to social financing, purchasing managers' index (PMI), changes in stock valuation, and bond investment. Factors such as social financing and PMI can reflect the lag relationship between credit cycles and infrastructure and real estate cycles, as well as the lag relationship between infrastructure and real estate cycles and economic growth cycles. This data is crucial for judging investment opportunities in certain industries, especially in sensitive industries and industries related to PMI, such as consumer discretionary. Factors such as risk appetite, opportunity cost, and discounted value are also influenced by liquidity, and stock valuations change accordingly. At the same time, liquidity also guides bond investment. General Manager Zhang cited some historical cases to demonstrate and explain the impact of liquidity on the market.

Next, General Manager Zhang explained the market value management of listed companies. The success of a good company depends on a good story, a good team, and the construction of moats, and market value management of listed companies is an important mechanism to maximize company value, involving employee incentives, stock ownership plans, private placements, reductions in holdings, mergers and acquisitions, share buybacks, etc., and leverage can be increased through different derivative instruments. General Manager Zhang shared a case of a corporate bankruptcy reorganization, pointing out that the company achieved regeneration and market value recovery by reorganizing and integrating resources when facing difficulties. This demonstrated the importance of market value management for listed companies and the measures taken in response to challenges.

Currently, capital market institutions are facing the transformation and innovation of profit models. They are continuously seeking innovation and change to adapt to market changes and competitive pressures. They strive to find new ways to achieve profitability through trading strategies, risk hedging, yield swaps, index investments, ETF arbitrage, market making, and securities lending, among others. Meanwhile, changes in regulation and the market environment also pose new challenges to the profitability models of institutions. With the continuous advancement of economic globalization, Hengqin, as an important part of the Guangdong-Hong Kong-Macau Greater Bay Area, is ushering in new opportunities and development prospects. When looking to the future development direction, cross-border capital, tax planning, and financial innovation are considered important pillars for Hengqin to embark on a new chapter.

GF Securities is a capital market service provider that focuses on providing comprehensive services to Chinese high-quality enterprises and investors' needs for financial products. As a leading provider of innovative capabilities in the industry, GF Securities meets the diverse needs of enterprises, individuals, institutional investors, financial institutions, and government clients through a rich set of financial tools and provides comprehensive solutions. Its business covers investment banking, wealth management, trading and institutional services, and investment management. Investment banking includes equity financing, debt financing, and financial advisory services, among others.

At the end of the sharing session, the students took this valuable opportunity to actively pose questions about the future trend of futures market, and Ms. Zhang answered in detail. Regarding the students’ willingness to have fieldwork opportunities, he would arrange in an orderly manner. The Faculty of Finance would like to thank GF Securities for gifting each student a beautiful handbook. The Seminar enables students to pay more attention to the development history and prospects of the futures market within the borders, and to gain in-depth knowledge of the practical use of futures and the operation of futures market through the financial seminar series. The students also look forward to participating in more financial seminars held by the faculty in the future.